A Federal judge in the Eastern District of Pennsylvania issued a new 46 page order (.pdf) in the Bragg v. Linden case denying Philip Rosedale’s motion to dismiss the portion of the lawsuit directed at him for lack of personal jurisdiction, and also denying defendants’ motion to compel arbitration.

Commentary

First, I’m excited to see how thoroughly the Court dug into these issues. The Court could have granted or denied these motions with little discussion, but it didn’t. The Order states: “Ultimately at issue in this case are the novel questions of what rights and obligations grow out of the relationship between the owner and creator of a virtual world and its resident-customers. While the property and the world where it is found are ‘virtual,’ the dispute is real.” You can tell that the Court “gets it” right off the top.

Regarding the motion to dismiss Rosedale for lack of personal jurisdiction, the bar for establishing personal jurisdiction is pretty low, so I wouldn’t read too much into that part of the Court’s decision. Realistically, there are a lot of ways Rosedale can get himself out of the case later, and personal jurisdiction is fairly easy to establish.

But the denial of the motion to compel arbitration? That is a pretty big deal.

Understand initially that arbitration provisions are enforced all the time, and defeating one isn’t ever a simple thing. Moreover, when there’s complex technology and somewhat bizarre issues involved, the smart money says there’s a good chance the Court will let alternative dispute resolution procedures play out before it tackles the case.

The smart money would have been wrong this time. The Court held that Linden Lab’s Terms of Service amount to a “contract of adhesion” that “provide[s] Linden with a variety of one-sided remedies to resolve disputes, while forcing its customers to arbitrate any disputes with Linden.” In other words, the arbitration provision — though equally applied to both Bragg and Linden — is unconscionable because the rest of the Terms of Service (particularly those provisions that give Linden Lab unilateral, unlimited ban rights) aren’t “mutual.”

Bottom line is that this is a pretty extraordinary decision which, assuming it survives an almost certain appeal, will likely be cited as the seminal decision in virtual law for the foreseeable future. It will certainly force Linden Lab to revisit their Terms of Service, and in the end, it will result in virtual world participants being viewed somewhat more as “citizens” of these spaces and somewhat less as gameplayers subject to the whims of the provider.

There are a lot of issues raised by this Order, among them: the impact on the other provisions of the TOS, the possibility for special rights for participants in virtual spaces, and whether this will encourage other law suits. Readers, please consider sharing your thoughts on these issues, or any other issues raised by this Order. There’s a lot to digest here, and I’d love to hear your thoughts.

What does not seem to have been canvassed in your post (and thus quite probably the judgment itself) is the question of whether a contract for the provision of computer server capacity and the use of software can be said to be fundamentally different in character to any other such contract merely because the thing that the servers are doing is simulating something (land and chattels) which, if real, would have specific sorts of legal rights attached to it (which is what Bragg appears, somewhat bizarrely when properly considered, to be claiming). That does not appear to have been an issue in the particular decision here, although the particular issues in dispute seem specific to the US legal system, so their significance is not easy to grasp for those from other jurisdictions. Ben, from your reading of the judgment, can you see any sign of the court treating the terms of service differently because they are the terms of service for a virtual world, or would the judgment be equally applicable to, say, web hosting?

On the one hand, I think the Court decided correctly. If Linden Lab is going to make the argument that they are a virtual world, and that their “citizens” have rights, and that people “own” their property, then they need to be held to that. I was working for a while on a paper that supported the personal jurisdiction argument, because it’s pretty clear that Rosedale essentially used the media as a soapbox to market the company.

On the other hand, I think it is sad that the Courts are considering these issues so seriously. The Internet is important, yeah, and it, to quote the court, “the most participatory form of mass speech yet developed.”

At the same time, that doesn’t mean most of the speech isn’t stupid shit that needs to be taken so seriously. My worry is that we’ll start to see “real life” law applied to the Internet culture and community as a whole. Time honored phenomena like trolling or griefing–which, while facially antisocial, aren’t really that harmful–will begin to be confused with assault or harassment. We’ve seen this begin already with the sex crimes aspect. It is the height of irresponsible ivory tower intellectualism to argue that humping someone’s avatar bears anything more than the barest passing resemblance to actual rape.

I like my goofy, drama-filled, satirical internet, and my only worry is that extending “real life” rights to amorphous Internet communities will make it a significantly less fun place to be.

Me, I’ve been ecstatic over this since hearing about it because I don’t think the company has always been consistent, much less fair, with residents. The TOS is extremely one-sided and just seeing Linden claim in Bragg that even *US dollar* deposits can be altered at will, alone, shocked my conscience. But wow… This is the first description I’ve read calling it a potentially seminal case in virtual law. I wonder how much such a ruling has to do with specifics to Second Life, considering the uniqueness of the service regarding supposedly Linden-recognized resident “property.” I’d like to think that a truly impartial party would immediately have been able to recognize that if residents really do have various property interests as claimed, such a TOS was and is grossly improper.

After reading the great points made in your article about the judge’s understanding of the issue, I begin to wonder still more how much this is a situating of himself to make an even strong resolution on virtual property altogether… and perhaps it’s only a matter of time till $L is declared to have value. I guess that’s still a long, tough battle ahead, and I don’t know anything about law anyway, so who knows.

I personally am most concerned about “speech” related issues on the service given the alleged property interests. I don’t even want to think what company employees have been doing to people less knowledgeable, less assertive, and with even less financial capacity to stand up for their consumer rights as Bragg. This is particularly true, recently, with the 100%-brand-new and inconsistent reinterpretation of the Community Standards with attempts to facilitate broader content regulation without publicly appearing to go against previous public assertions (and rather than simply citing unilateral TOS section 4.1 authority and restating company objectives re regulation, in the process). Bragg’s case, to me, is most saliently about equity, and at this point, I too am wondering if all of these sorts of public statements coming out of the Linden PR machine are indeed intentional (as opposed to merely gross mismanagement). I don’t know the truth about circumstances leading to his account termination (guess there will be a chance now), but I do know that it’s been long past time this particular world operator did more to respect its residents and *certainly* also started answering to its public statement inconsistencies vs its actions.

Regardless, Mr. Bragg and his lawyer are, in my mind, true Americans. I hope to have the opportunity to buy some Woebegone fireworks some day.

While I’m happy the arbitration clause fell, I don’t think that victory on its own will make Bragg a seminal case. Sure, virtual worlds will redraft their ToS, and they’ll be sure to make their arbitration clauses less ridiculous, but that’s about it.

What will make Bragg important is the stance the court eventually takes on the virtual property ownership issue. And with respect to that issue, I’m not so convinced the court “gets it.”

Specifically, throughout the opinion, the court conflates virtual property rights with copyright rights in virtual property. This is severe enough that the court is sometimes flat-out wrong, such as claiming that Linden grants “property rights in virtual land” when the ToS do exactly the opposite. I write about this confusion quite a bit more on my blog.

I subscribed to your RSS feed around the time of your “trademark infringement in Second Life” post; keep up the interesting writing.

Thanks for the comment, Kurt. I just visited your post on this. You are absolutely right that commentators and courts need to keep the distinction between copyright rights and virtual property rights clear, and right that here, the court conflates the two. Since it didn’t make any difference for the Court’s analysis in this order, I’m inclined to believe that it wasn’t briefed clearly, and that the lawyers will educate the court as to the distinction in summary judgment papers.

As to your first point, I’m not really sure that the TOS can be redrafted to make it less one-sided without fairly fundamentally changing the relationship between “citizens” and Linden Lab. It’s not the arbitration clause itself that did in the TOS, it’s that the rest of the TOS were so lopsided. Lopsided TOS are the key to establishing the sort of capricious dictatorships gameplayers and virtual world citizens have basically come to expect. My feeling is just about any case against WoW, Ultima, or a number of other game/worlds where people sell content could have done this at any point in the last ten years, but none did because there’s never been enough at stake for litigants to bother or for courts to pay attention. And no game/world ever explicitly said, “Come here and make real money!” either.

So basically, I believe that it’s going to be considered a seminal case because it’s the first time a court has said, “Wait, there’s money on the line? Well then, no — the administrator doesn’t get unlimited power here.”

[...] The move appears to be a direct result of the decision in the Bragg case finding the previous arbitration clause unconscionable. The new clause makes two significant changes, one that dramatically benefits small claimants, and one that makes it more expensive and burdensome to bring big claims. [...]

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From early 2007 to late 2008, Virtually Blind covered legal news, issues, and events that impact virtual worlds, video games, and the 3D internet. The site is no longer updated, though it remains online as a research resource.

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